The 5 Major Factors That Influence Your Credit Score

Posted by on November 28, 2019 @14:01:08 EST
A wallet standing open on a table, with credit cards visible

No matter who you are or where you’re living, odds are you have a credit score — and chances are that score is incredibly important to you. Given that it’s a requirement for practically all of the major purchases that we’re going to make in our adult lives (playing a part in everything from a home to a car to a television) you’d be well advised to keep your credit score as healthy as possible. Sometimes, for a particularly sickly score, you’ll need to engage in credit repair; other times, however, it’s enough to just have an idea of how exactly the score is calculated in the first place.

Even though there are hundreds of different algorithms that are used to calculate credit scores, each of them pretty much makes us of the same five major factors in some form or other. That’s why we’ve decided to create a handy guide to the five biggest things that play a part in the calculation of your credit score. Read on to discover exactly how that three-digit number is constructed.

1. CUR (Credit Utilization Ratio)

A man holding out a credit card holder, with a MasterCard visible.

This is probably the single most complicated factor that goes into the computation of your credit score, no matter which algorithm is being used to calculate the score in question. Granted, there will be small variations throughout the different methods used to create credit scores, but as a general rule this will account for around a third of the overall credit score’s value. Because it’s so highly weighted, it can be an excellent thing to include in a comprehensive credit repair plan, since even a small improvement will have a knock-on effect for the rest of the score that’ll soon see you headed towards the coveted land of Prime and Superprime scores.

Basically speaking, a credit utilisation ratio is a way of figuring out how much of your available credit you’re actually using at any given moment. Because any credit repair plan must by definition account for exactly how, where, and when your credit is being used, it’s a good idea to keep track of your CUR as much as is possible. The ratio itself is represented by a fraction, and is calculated by dividing the total amount of revolving credit you’re currently using by the total amount of all of your potential revolving credit limits.

It might sound a little complex, but the good news is that you don’t need to calculate this ratio perfectly yourself. It’s often enough to get a rough estimate, since that’ll tell you where you’re at in your credit repair journey well enough to work out how you’re doing overall. The ratio itself will give you an idea of how much of your available credit you’re using at any given point in your financial history. Be careful not to use more than 30% of the lines of credit you have available to you — in truth, it’s best to err on the side of caution, i.e. sticking to a maximum of around 25% or so — since that 30% is the cutoff point at which creditors start to perceive the ratio as being a negative influence on your financial health.

2. Credit Report Inquiries

Also known as hard inquiries, these are requests that lenders make of your own credit score every now and again. It’s a totally normal part of any loan process, since they’ll want to know what the story is with your credit in general, and when hard inquiries happen in moderation there’s certainly nothing to worry about. However, as with all things credit repair related, there are general guidelines that you’ll want to stick to in order to make sure you’re giving yourself the best possible chance at keeping it all ticking over in the healthiest way possible.

These kinds of inquiries can be made by any number of lenders, and for any number of reasons. Whether you’re trying to get a mortgage for your first home or you’re simply attempting to buy a new television, each of those lenders has the ability to check your credit report to see how things have been going. The scenario in which this is a negative is if you’ve been requesting a lot of loans recently. Because each inquiry the company in question makes into your credit report will stay on your file for up to two years, if you’re not careful about when and from whom you request a loan, you could end up with a long run of hard inquiries in your file.

This is considered a bad thing because it shows that you’re being a little profligate with your loaning habits, and it’s something creditors never like to see. If you’re in any doubt about how many of these inquiries are currently kicking around on your file, you can check your credit report fairly easily — and for free — three times a year, assuming you’re requesting one report each from TransUnion, Experian, and Equifax.

3. Payment History

This is the single most important aspect of anybody’s credit report, and should be the very first priority when it comes to performing credit repair on an ailing score. Payment history, which is a vague enough term in itself, refers to how exactly you’ve been making any payments in your history for the last number of years. This single factor alone counts for up to 35% of your overall score’s calculation according to the FICO algorithm, so it should probably be the very first thing you clean up as you begin repairing your credit score. 

The ideal financially health adult pays back all of his or her financial commitments in full and on time. It’s important to note that both the amount that gets paid back and the timeframe in which the amount gets paid back are vital aspects to the overall calculation; i.e., it’s not enough to pay back some of the amount on time, or the whole amount but a little later than is ideal. Anybody who’s going to bee lending you money will want to know exactly how likely you are to pay back the money they’ll be giving you, and payment history is the most real-world representation of that fact. 

Even a single missed payment can be enough to tank your score some, so be sure that your payment history ducks are all in a line long before you ever walk into a lender’s office. It would be a real shame to have performed all the other aspects of credit repair perfectly, only to become undone because of the fact that you’ve neglected to take care of your payment history. If you’re in any doubt about the current state of your history, go back over your records and check for yourself how you’ve been doing. It might just make the difference when it comes to the final decision the lender makes about you and your trustworthiness as somebody to lend money to.

4. Bad Information

As anybody who has spent any time working on credit repair will be able to tell you, there is no shortage of pitfalls that unsuspecting people can fall down on as they try to secure financing for a loan of some variety. As a matter of fact, there are many more ways information can hurt your credit score than ways it can actually help things out, so it’s vital that you’re hyper vigilant when it comes to the kind of information that gets noted down in your credit file. 

Because some of this negative information can continue to affect your credit score for up to seven years, you’re going to want to take extra special care when it comes to making some of the mistakes that can lead to such long-term problems for your score. Missed payments, or payments that arrived significantly later than they were supposed to, are the most serious pieces of bad information that can appear on your credit report, so watch out for those. similarly, foreclosures and charge-offs will stick around for a while as well, and might well undo any good work you’ve been doing when it comes to performing credit repair techniques on your score.

Basically, anything that will show that you’ve defaulted on a loan to some degree in the past is going to be a major red flag for anybody who’s considering lending you money. Your personal credit profile will play a part in how serious these pieces of negative history actually are, but every credit record will take a dim view indeed of any missed or late payments, etc, so it’s better to be safe than sorry. If you’re not sure about what’s actually on your credit file, it’s probably worth getting a copy of your credit report just to make sure, especially considering how long-term the infractions are. 

5. The Kinds of Credit You’re Carrying

Finally, the fifth major factor that plays a part in your credit score is the mixture of different lines of credit you’re currently working with at any given time. It can be a little counterintuitive, this point, especially since many of us won’t even have considered having different kinds of credit score — but the positive effect it can have on your credit repair journey is too significant to ignore. People with the very best scores (think figures in the high 600s and 700s) will usually be working with a range of different kinds of credit.

The different algorithms that calculate credit scores all perform the same. Task in their own way, but every single one weighs credit mix quite highly on the list of priorities. Somebody who has a diverse portfolio of different kinds of credit is automatically perceived as somebody who is able to handle lots of different kinds of financial commitments at the same time, which tells the algorithm that the person in question is likely to be very reliable when it comes to paying back the money people lend them.

If you’ve never even considered having different kinds of credit account, now may be a good time to start. It’s an important aspect of credit repair, and the potential benefit for your overall score is huge. Of course, a lot of people are stressed enough about a single credit account, and won’t be keen on opening another. As with so many good financial practices however, in this case too it’s worth going against your gut feeling and playing the numbers game. After all, the whole point of getting a good credit score is to give yourself the best interest rates and most favourable loan terms, no matter what it is you’re borrowing money to buy — so it could well be worth a little extra stress, given that it’ll pay dividends down the line. 


Credit scores are complicated enough in their own right, but they get even more confusing when you factor in the emotional component that inevitably plays a part in large financial decisions. We hope that by reading this article, you’ll be able to walk away with a better understanding of how credit scores work in the first place, and that you’ll be able to work on your own credit repair plan if you ever need to. 

As a final note, here at Auto Loan Solutions we don’t discriminate between credit scores when considering people for vehicle loans. Keeping that in mind, if you’ve been struggling to get approval for a loan, feel free to get in touch with us today. We’d love to talk you through exactly how we can help out with your particular situation.

Let's Get Started

Join thousands of Canadians who have trusted

Get Approved Now